As Paul Graham usually does with his essays, he makes a deep point with relative ease. Today’s essay, which many of you have read (and if you haven’t, please read it here) is even more intense. I had a sense he would be writing about the relationship between the proliferation of technology and its potential relationship to income disparity, and I know from some of his tweets over the course of the last month, he was likely extra careful in selecting his language for fear of being accused of insensitivity given the consequences if his theory is correct.
I’ve read the essay now twice and, as someone who grew up studying history and still tries to pay attention to how broader themes shape nations, societies, and cultures, I have to say that Graham’s essay is one of the most powerful I’ve ever read. He spends more time explaining “why” the world is the way it is today, and doesn’t wade into the territory of “OK, so what do we do about it?” Those are thornier issues to discuss, and perhaps the first step in addressing them is the acceptance that they’re happening to begin with.
If I had to boil down the essay (which is unfair, because it is very economical in its language already), my big takeaway is that as the 21st century unfolds with the power of the Internet at scale through mobile devices and the proliferation of technology and computing power into every industry, it calls into question The Coase Theorem which, for decades, defined why larger corporations existed — to manage complex transactional costs. Today, based on this essay, one could argue The Graham Theorem is now that networks of smaller companies render Coase obsolete. A step further, these smaller networks of companies (like that come out of YC) leverage technologies (through instruments like APIs) and can be run by smaller numbers of people, yet will likely accrue financial leverage as a result of the ratio of human:computer labor needed to manage and execute those transaction costs. Computers now make it cheaper, faster, and more efficient.
(As an aside, I’m sure there are other factors to consider in the argument that were not discussed. It is his essay and point of view. I am sure land issues could be another factor that drives inequality, or complex issues around socioeconomic status, race, gender, as well as access to educational resources.)
I do mean to imply there aren’t other factor at play, but to me, the more interesting question posed by the essay is — “Let’s assume this is happening. Then, what?”
Graham stops short of suggesting “what.” I understand why. It is too much for this post. The first step is acceptance. Income inequality is happening, and it is (perhaps not entirely?) driven by the accelerating rate and power of technological proliferation.
If society does “accept” The Graham Theorem as the prevailing OS of society (replacing Coase), what should our collective response be? Here are some ideas that are cited, and likely we will need all of these and more:
1/ Education: “We need more access to better education.” Yet, many believe our higher education institutes have been raising tuition while failing to keep students on pace for changes in the workforce. Perhaps YC is one of the first examples of that — forgoing graduate school, for instance, to join an accelerator.
2/ Guaranteed Income: This has been an argument — to proactively set basic income levels for citizens — advanced most notably by USV’s Albert Wenger, and most recently by YC’s current President, Sam Altman. Albert has been writing about the intersection of these issues for many years now, and I believe is writing a book that will touch on the topic. You can read one of his posts (which links to a video talk) here.
3/ Taxation: Graham points out we could theoretically tax economically accretive behavior to slow the effects of The Graham Theorem and redistribute wealth, but if done too bluntly, those creators could move to another nation that has more favorable laws and would want to compete for that talent, just like companies are competing for talent today. (This also is connected to global immigration, see below.)
4/ Immigration Reform: This is a sad topic in America today for so many reasons, especially given what is happening in other parts of the world today and how so many of America’s great entrepreneurial stories are carried through by first-generation immigrants. Many have clearly argued for immediate reform, but that seems politically infeasible in a country where xenophobia feels on the rise and where more and more people are beginning to feel excluded from the pistons which drive today’s global economy: technology. (Earlier, Graham has argued on his blog for U.S. immigration reform, citing global competition for talent as a potentially zero-sum game.)
Graham ends his essay today with the following warning (italics and emphasis added):
I worry that if we don’t acknowledge this, we’re headed for trouble. If we think 20th century cohesion disappeared because of few policy tweaks, we’ll be deluded into thinking we can get it back (minus the bad parts, somehow) with a few countertweaks. And then we’ll waste our time trying to eliminate fragmentation, when we’d be better off thinking about how to mitigate its consequences.
It’s a strong statement by someone who is careful with their words: “we’re headed for trouble.” As a reader of Albert’s blog for many years, I’ve come to admire his academic-style and now policy work to advance the issue. He and I have disagreed on what will actually happen. I admire that he is using his power to advance the issue and writing a book which touches on the subject. I am not as optimistic (sadly), where I see the “trouble” being more pronounced, leading to real conflict, causing many people to feel excluded from the economy and from the means of production, and while I want essays like this and Albert’s book to have a positive impact on policy and legislation, the country’s politics and willingness to make hard choices upfront seems to be running on limited reserves. That is my own personal takeaway from reflecting on Graham’s excellent post.
A few days ago, I wrote an opinion post on my blog, based on my point of view on what I’ve read and my experiences working in India, about the debate going on India currently between’s Facebook’s desire to push FreeBasics and the impassioned response (among many of the vocal majority) to oppose it. I knew when I was writing it and when I hit publish that many people wouldn’t like my POV, but my philosophy in writing publicly (for better or worse) is to think about my own POV and to share it without apologies, no matter the recourse.
The recourse in this case was a bit more than I had bargained for.
I received many Disqus comments and tweets lashing out at my POV. Some of them were too ad-hominem in nature to even entertain. Some of them had a strong but polite differing of opinion. I also received many private emails, which on one hand is great because I am grateful that people care to read what I write, but also a bit overwhelming as some of them were quite accusatory. That said, a few folks did write to me very thoughtfully and some engaged in conversation over email, which I greatly appreciate — I never write to prove that I’m right on a topic, I write to share the POV that’s inside my head, and I never claim for that POV to be correct.
In digesting all of the attacks and feedback, I wanted to clarify a bunch of things that are either related to me, to the original post, or to the issue in general — I realized in reading some of the comments that I likely didn’t do as careful a job in selecting or framing my language with disclaimers, and I underestimated (despite my local knowledge) how much of an emotional issue this is for many people.
So, in the spirit of continuous learning, of never assuming I’m always right, of being unafraid to clarify or admit an incorrect passage, and in the spirit of defending my own right to share a free POV (which folks can also choose not to read), I offer the following quick follow-up, in no particular order:
1/ I have spent real time working in India. With major universities. With the government. I have been all over the country. I may not be on the ground now or have been yesterday, but I got a lot of messages asserting I’ve never spent time there or know the country. I have also followed the issue at hand, despite people conflating their disagreement with me with evidence of my being misinformed.
2/ I do not work for Facebook. That was a comical assertion among a few. I am a Facebook fan, I own lots of Facebook stock (relative to my overall portfolio), I think it’s the best-run company in the world, and no matter how folks in India or other parts of the world get online, chances are good anyway a majority of them will end up on Facebook properties voluntarily.
3/ The focus of my argument was rural. I should’ve done a better job stating this upfront and multiple times. Yes, people will still disagree with that (which is fine). Naturally, city-dwellers in India of all socioeconomic levels will have access to new or used phones and be able to get online one way or another. I don’t have great confidence in the government’s ability to do the same for rural populations (which are over 600M+ in India), and cited some harsh historical facts to make the argument. Of course, people didn’t like those and saw them as patronizing — I love India and the people and would never say I am better than the country. No patronizing on my part or intent, and I used the term “License Raj” as a historical term applied to rural settings, but I think it was too hot-button to use at all. I should’ve stated the following, too: My preference, of course, would be for the country itself to bring these folks online, but I was just being honest in my POV that I don’t believe that will happen in a reasonable time frame.
4/ I did a poor job of not pointing out that I do personally believe that net neutrality is important. Of course, I do. Rather, I was making an argument out of being pragmatic, out of cutting a corner to accelerate access to wireless networks and the web. Of course, in a perfect world, people should be able to get online and not be restricted of where they surf or what apps they use (and pay for them in proper ways). I see the debate today as a way to kickstart (if even imperfectly) the onramp, and while the majority of responders (who disliked my post) disagreed, that was just my POV. Of course, in a perfect world, I would hope the Indian government and Indian telco’s got the rural folks online. That would be my hope, and again, for better or worse, my honest POV is one of deeper skepticism around that happening in a reasonable timeframe. Yes, I could be wrong, but that’s my POV. My hope wouldn’t be for Facebook or any other company to fill that void, but I do believe we will see more of this in other countries and, given Facebook’s execution prowess, I think they will succeed in cutting these types of deals in other places.
5/ Twitter isn’t a great Medium for conversation. It was much better to have emails sent to me calmly explaining what folks felt or read. I was able to digest and see where my language could’ve been misinterpreted. I appreciated the time those folks took to write to me privately. Thank you for that. On the flip, it was easy to just block and mute people who were attacking or conversing blindly on Twitter, but another lesson learned on the medium. I also got tons of messages of people I’ve never heard from in my life who said they were long-time readers of my blog, but only know felt compelled to reach out to me. I guess there’s no time like the current right now to introduce yourself.
Anyway, I learned a ton through the process, which is always my ultimate goal, and again, I am truly grateful for those few folks who wrote to me privately and shared their POV. Thank you.
It’s easy to think of Facebook as the world’s largest social network. It takes a bit more imagination to envision Facebook as the world’s dominant global nation-state, a new type state where citizens can connect and communicate across political borders and where the network’s CEO, who is only currently 31 years old, is on a march to be the world’s richest and most powerful businessperson by a long mile.
Zuck and Facebook have been able to tackle and master most challenges that’ve stood in there way. Today in India, the company and Internet.org want to use a mix of satellites and unmanned aerial vehicles to provide connectivity to India’s rural population. And, of course, there is a catch, but one worth exploring.
In a previous life, I worked on many projects all over India. For a while, I thought I would move there — I was born in the U.S., first-generation, and grew more and more fascinated with the idea of moving to India during and after graduate school. I don’t want this to come off the wrong way, as I love the country and all the potential, but I got burnt out by the business climate and found myself longing to get back to California.
It’s been a good while since I’ve spent cycles thinking about India at large, but today was a day that jogged many old memories. The background is: Facebook CEO Mark Zuckerberg and his team have devised, with Internet.org, a way to bring basic web communications and services to the rural poor in India, with the help of unmanned aerial vehicles, micro-satellites, and balloons. The catch is Facebook won’t provide these new users with full access to the entire “heavy” web of YouTube videos and bulky web pages — instead, he and Facebook will offer, in partnership with India’s Reliance, a zero-rated (e.g. free of data charges) service called “Free Basics” which will provide users with basic web and communication services such as email, chat, education portals, and so forth.
Zuckerberg is a savvy technocrat. With one billion users on his platforms today, he knows the two plum global markets to crack to grow Facebook are China and India. ‘Free Basics” is a digital olive branch meant to simultaneously connect hundreds of millions of poor and unconnected citizens across India’s great farmlands.
But, as I learned by catching up on all the news today, no good deed goes unpunished.
Activist groups in India are trying to block the deal. Their argument is (1) net neutrality must be protected on behalf of new digital population and (2) Free Basics restricts the web for the poor. Activists in opposition to Facebook’s deal believe giving away this audience to Facebook isn’t worth the long-term risk of giving aways keys to the digital kingdom to a California-based company that’s on a path to be the most powerful corporation in the world.
From the POV of Facebook and Internet.org, their remote data technologies would empower some of the world’s poorest people, in conjunction with Reliance for data, to harness the web for basic functions like learning, communication, photos, and so forth. Most recently, however, it seems like both the media and the regulators are having cold feet about giving Facebook these keys to their citizens. (You can read Zuck’s op-ed he placed in Indian newspaper here.)
The License Raj in India both provides protection for national industries but also presents a roadblock to national economic success. For instance, for many decades, China would leverage the unique tax and economic incentives with special economic zones (SEZs), but India’s attempt to copy them mainly resulted in property scams which marginalized the disenfranchised the poor rural landowner. Going back many decades to the time of India’s independence from The British Empire, U.S. forces and automakers tried to be first to market by offering to build highways and roads for the new country in exchange for the right to sell into these new open markets.
India refused these overtures from “the outside” in the past, a reaction most-likely fueled by a distaste for its own historical memory of colonial occupation. One could argue a host of reasons why India should have acted differently, but it’s worth keeping in mind India has only been truly independent since midway through the 20th Century. There is a deep-seated belief in India, after the Raj, that they themselves as a nation want to address their own problems. India prides itself on its democracy, but even that political system is not wholly their own — it was a parting gift from its previous rulers everyone accepts to be the best system of governance.
What we have today in India, of course, are networks of crappy roads, two-lane dangerous highways, and a government who doesn’t have the will to consider modern infrastructure projects. Will the state of India’s physical roads provide a harbinger of what to expect as the country gears up to have hundreds of million more citizens come online through all the new and reused mobile phones that will be hitting the market?
Given all this context, this is why the news about activist groups in India trying to stop or disrupt Facebook’s negotiations is so tragically comical. After Facebook built up a this service (“Basics”) and prepared to offer this suite of services for free in return for trying to hook the newest of the new potential users, dissenters began to question the impact of Free Basics as it relates to the Net Neutrality debate. To this end, you can read up about India’s possible nuking of this deal and read specifically the op-ed Zuck took out in an Indian newspaper today to make sure his arguments are heard.
In the end, paternalistic activists may end up blocking Facebook from its plans in the name of Net Neutrality, thus denying the over 600 million citizens who live in relative rural poverty the chance to escape the farm, the chance to leave the slums, and the chance to simply communicate with their families, which could by now be scattered across India or other parts of the world.
Personally, if activists in India block this, it will be a sad day for the country. If Facebook’s plans are thwarted, how will the Government of India step up to ensure these rural citizens have the devices, networks, and money to charge their phones and pay data rates in order to surf the neutral net they want to defende? The Government can say “no” to a new project, but would they have the resolve and passion to fund an alternative to universal web services access?
The lingering effects of the License Raj are crippling India when the country needs order the most. The cult of the License Raj drove India to mostly build its own roads and spur help from other outside forces. Today’s roads in India are an outdated relic of the past, and there’s no reason to believe tomorrow’s data networks will be any better.
I wonder if someone polled just 100m rural Indian citizens and asked them, if given the choice between (1) a basic smartphone where they could search Wikipedia, connect with other people, email, and talk on Facebook-related platforms and not have to pay for the data or (2) nothing, I have a sneaking suspicion at least 99m would opt for Choice #1.
Whatever happens here, the larger point is global corporations are the new data networks that society will be built upon, and in the case of Facebook, can provide critical infrastructure and access to a huge population at a much faster and efficient rate than government could. By contrast, India’s government, activist culture, and penchant for arguing nuance may end up losing the forest (a step toward universal access and lifting out of poverty) for the trees (long-term concerns around Net Neutrality).
When I post this, I know it will rile up some folks in India and who are ex-pats who sympathize with the protective benefits of The License Raj culture, but I feel quite confident having access to the web (even if limited to start) is a core human right and an essential ingredient to lifting anyone — in India or other rural places in third-world countries — into a new life.
In anticipation of the ethical challenges that would present themselves as a result of advancements in medicine, biology, and technology, the field of bioethics was born, an interdisciplinary field of study whose aim is to provide frameworks for making decisions in a world defined by increasingly advanced, complex technology. For example, how does society respond to the bioethical dilemma presented by cloning? History and humans have largely (so far) demonstrated there is a line they don’t want to see crossed.
Fast forward to this century, and of late, there’s been ample discussion of “Artificial Intelligence” (AI) lately. Over the past few months, major global technology companies from Amazon, Facebook, Microsoft, IBM, and even Apple have “open-sourced” elements of their technology stack to make them available for developers to freely contribute to and build on top of. And, most recently, we’ve seen the launch of OpenAI, a billion-dollar-plus nonprofit initiative with the aim of advancing AI to make its discoveries open as a check against the larger, aforementioned companies having a controlling monopoly on these technologies.
The topic of AI itself is massive, a life’s work only a few people with the proper, interdisciplinary training can even hope to master. I am not in that league, but I do observe how the term has been thrown social media. People now see and hear the term “AI” thrown into tweets, slide decks, email blurbs, press releases — the language of AI has taken on a life of its own. To make sure I understood the issues, I found it useful to read through resources like this, and what I was struck by was how multiple advances in seemingly unrelated technologies (such as drones and neural networks) could create a moment in time where AI, as a field of study, could cross the threshold from siloed experiments into integrated systems in the real world.
And, if we (1) look back at the field of bioethics and issues such as cloning, we start to see that humans have arisen to place parameters on what advancements in integrated technologies could afford; and, again, if we consider (2) the growing strength of public Internet companies such as Apple, Amazon, Facebook, Google, and more, it becomes easier to envision a world where these companies grow even bigger and stronger; where they extend their product lines deeper into mobile phones, drones, satellites, and other devices connected to the web; where they continue to accumulate rich, dynamic, never-seen-before and unreplicable data sets on our behaviors, intents, relationships; and corporations which, thanks to the glorious network effects of the Internet, be awash in cash profits for decades, to the point where they can afford to open-source some of their most core technological insights.
In a world where resources for AI and machine learning are open-sourced by the larger incumbents, the impending democratization of those technologies will likely lead to a situation where the most proprietary value lies less within AI, but more within the corresponding datasets the machines need to process information from in the first place. Building new products and services with open-source technology may help foster and accelerate innovation, but who will own or have access to those datasets? It’s a question I’ve been thinking about as we will likely see a whole new wave of entrepreneurs who try to harness these free services in the same way they did with platforms like iOS, Android, and the advent of cloud computing.
Seen through this lens, the moves by the big tech companies and the creation of OpenAI all make perfect sense. It may seem like a lot of money, but this is just the beginning. Machines are increasingly mobile, increasingly able to handle more tasks, increasingly able to more efficiently harness the power and flexibility of the chips and operating systems they sit on top of, and are increasingly lowering in BOM and operational costs. One of the world’s premier VC firms, which publicly discuss its investment thesis as one where “engaged networks of people can disrupt large markets,” has invested in a company in 2015 where the thesis is extended to a network of machines can not only take the place of people — the machine network can operate 24/7, learn with each new piece of data it collects, and become its own platform for other developers to build on top of.
I am less of a long-term thinker these days. I think about things that could happen 3-5 years out. Or, I try to. But based on a few investments I’ve made in the space, the increase in pitch meetings where these integrated technologies are brought to market, and the timing around all the larger companies open-sourcing some of their secrets, it strikes me that a world of intelligent machines — Computer Sapiens — may arrive much sooner than we collectively recognize. Already, machine learning products are improving interpersonal communications, sales and marketing automation, and many more, all along the way driving margins by lowering the need for human input and maintenance. Who owns and who has access to not only these technologies, but also the datasets that will drive them, will be a fascinating fault line to observe as the plate tectonics of AI shuffle over the next decade.
I am very proud the announce the first investment of Haystack III: OneConcern.
I met the founders through another friend at a fund, he was looking at the company and knew that I liked software plays that sold to national, state, and municipal governments. Most investors don’t like those sales channels, but I do. Why? Because I believe over time the budgets for certain things (health, emergency, climate) will balloon to meet societal needs while many others will fade and erode because we simply won’t have the money in the tax base to get it done. Those essential tasks then will have to be left to technology and software, and in my investing, I’ve found that once an entrepreneur figures out how to sell into governments and builds the right stuff, it is one of the best channels out there because words spread through different networks and it’s harder for a new entrant to cut in.
Anyway, I met the CEO at the request of my other investor friend, and I was immediately captivated by his personal story and academic background. The CEO, a structural engineer from Asia who came to Stanford to study the science behind earthquakes and other natural disasters. This is a tangent, but I enjoy studying the history of earthquakes and learning about how societies have dealt with them. I troll Wikipedia to give my brain a break and read up on these things, so when I met the CEO, I was actually excited to talk about big earthquakes and data, etc. What I came to understand from that meeting, however, was even deeper.
A few years ago, during the major floods in Pakistan, Ahmad (the CEO) was home visiting his family and was caught in the floods. He escaped to the attic of his family’s house and lived on or near the roof for over a week until he was rescued by authorities. I always ask a founder about how past experiences may shape future activities, but I never expected a machine learning engineer focused on building software to help states mitigate disaster response systems say that he himself was caught in a major natural disaster.
While I always try to spend time “in diligence” and vetting a company, I realize now in retrospect I probably spent too much time doing that with OneConcern. The beauty of investing at the seed stage is that I can work with tons of other investors to support companies who start out and have ambitions to grow bigger. Yet, much of the early stages — myself included — have become professionalized, often to the point of placing unrealistic expectations on new companies, new technologies, and new founders, when in fact it should just be about the identification of earnest talent and the relentless support of that talent. I may have conducted my proper diligence, but some things don’t need diligence; a product like OneConcern and an entrepreneurial story like Ahmad’s must be supported — it must be willed into the world, and just like I am trying to do with the creation of Haystack and my own family funds, it will be willed into world no matter what. The solution must exist, and the network of other investors will support it to see it through with their own sweat and passion. That is inspiring to watch unfold and be a part of, indeed.
Tomorrow is the second installment of The On Demand Conference, this one taking place in Manhattan. My co-conspirators Pascal from Checkr, Misha from Tradecraft, and the entire Tradecraft team have put together an incredible agenda, event, speaker lineup, and topic list. Sadly, I am not able to make this trip, but I can’t wait to hear about it from friends and colleagues who will be attending. If you haven’t already, check out the Line Up and all the great Agenda Topics that will be discussed.
The on-demand startup world has gone through some downs since the last conference. I’ve written about those here. In my conversations with Pascal and other investors about this, there’s no doubt that the bar goes higher and higher now for companies to earn venture investment. While the consumer demand for these services still remains, how that demand is fulfilled is now under question — and that’s a good thing.
In particular for New York City, with its own great startup scene, this is a good venue for this discussion given the competition and density. It will be interesting to see if one coast has figured out tricks the other coast can learn from, and vice versa. On a personal note, I will be sad to miss tonight’s smaller drinks event for the speakers and moderators, will miss hanging out with Shai, Steve, Matt, the Button folks, and many other friends I’d love to have seen, and I was really looking forward to opening tomorrow’s session in a fireside chat with Albert from USV, but Misha is stepping in and is also interested in many of the same issues touching the on-demand space. (In particular, make sure to read Albert’s post today about the connection between on-demand services, automation, and guaranteed basic income.)
Wishing everyone the best of luck with tonight and tomorrow’s big show, and a huge thanks to Pascal, Misha, for their support. They make this stuff happen with the greatest care and attention to detail.
As it relates to startups (and investing in them), the past week’s stock market correction (which still may be going) is just what the doctor ordered. Who knows why it happened exactly — sending a message to the Fed, international market fears, people realizing P/Es were too high, blah blah blah….
The net effect now after some stability is the correction was medicine everyone needed. More specifically, I think the correction and intense social & traditional media focus on it actually makes this better for everyone in the startup ecosystem:
First, writers, analysts, bloggers, and arm chair Twitter economists now have more to write about that timely, global, and more hard-nosed. They can go up to a founder or investor and simply ask “Well, did you crap your pants?” The press has been somewhat reluctant to balance cheerleading entrepreneurship with asking key fundamental questions.
Second, investors can now leverage recent market gyrations to negotiate down valuations. For years, investors couldn’t do this at the risk of losing a deal or offending a founder, but now everyone understands that a bit more balanced has been restored to the ecosystem, and investors (may) get some lower prices.
And, Third, founders avoided catastrophe. If the market kept sliding, many investors would’ve been fine (with bruised portfolio metrics), and writers/bloggers would’ve had a field day, but entrepreneurs, founders, and very early-stage employees (and frankly many rank and file) would’ve been in a real jam. Runways could’ve started to compress. People could’ve jumped ship to work at a safer job. This jolt was a nice reality check and doesn’t seem to affect the long-term positive outlook for technology seeping into the world.
For these three reasons, the recent market volatility may just have been exactly what the doctor ordered.
Back in May, just three months ago, the inaugural “On-Demand Conference” was a hit in San Francisco. That conference concluded with a lively ending where a debate among investors brewed over the issues facing contract workers in the gig economy. [video archive]
Now, just three months later, it’s as if we live in a new world. Some state governments across the country have issues preliminary rulings about worker classification; a parade of well-funded on-demand startups have made headlines by proactively converting some or all of their contractors to W-2’s; presidential candidates running for office in 2016 have brought the topic into debates and headlines; and all of it has come together as a bonafide mainstream news topic.
While things are changing quickly, some of the world’s best venture capitalists have grown wary of the sector. Some have warned that on-demand consumer solutions are saturated, and that not everything needs to be on-demand, and that the high capital intensity in scaling (often without technology moats) all make for a dubious investment climate.
These are are, indeed, valid concerns. Just as the last conference generated substantive debate and featured an entire day of highly-focused content from the startups and operators building these companies, our aim with Act 2 is to double-down on our organizational efforts and create the space where the most pressing issues can be surfaced and debated.
To that end, we have a All-Star East Coast lineup for the event. Click here to see the agenda and browse through the names. We will have managers and GMs from companies like Uber, Instacart, Postmates and many more; we will have some of NYC’s best investor minds on stage; and we will have tech media representing The New York Times, VentureBeat, Scientific American, Forbes, and more.
Finally, and a bit selfishly, I”m excited to share that I will open up the day’s events in a fireside chat with Albert Wenger from Union Square Ventures. For those of you who read Continuations, Albert’s blog, you’ll know he’s written extensively about Uber and ridesharing technologies, about how workers are classified and treated, and his argument to call for Universal Basic Income as a policy in anticipation of a world that may be automated by advancements in technology.
It all has the makings for a fantastic event. I’m looking forward to it. For more information and to register, click here.
I have been waiting for the “independent contractor vs full employee” debate to go mainstream. It’s the 1099ers vs the W-2’s. It’s happening, right now. This past week, I was invited to be on NPR for a great discussion hosted by KCRW for “To The Point,” which included Noam Scheiber from The New York Times, Ben White from Politico, David Rolf from SEIU, and yours truly. You can listen to our conversation here, it’s 32 minutes and though I’m biased, it’s a great survey of where we are today, how politics are going to get involved (a la Hillary), and how powerful Uber’s moves are vis a vis the rest of the small but growing on-demand sector:
Back in September 2012, before I started investing, , I wrote a post for my TechCrunch column titled, “Recruiting The New Labor Force.” In that post, which is worth re-reading carefully, I mentioned there is an underbelly to any new trend, such as the on-demand sector:
As with any new wave, there is an underbelly. These new companies are more efficient at routing a freelancer’s time, assuming there’s enough demand. Being an actual freelancer may suit some just fine, for a while, but eventually, I’d imagine many of them may want more predictable, more reliable forms of employment — a sentiment many Lyft and Sidecar drivers expressed to me during my many rides with them. These folks often were in between jobs, or in some kind of transitional phase of their lives. The way forward could be that companies like Postmates or Instacart provide that softer landing for those moving in and out of the formal labor market, or perhaps they themselves turn into real companies that fully employ freelancers, more along the model that Exec seems to be carving out, as a staffing solutions company.
Speaking of fulfilling requests, those are usually completed by humans enabled by software. Right now, with the bottom-third (or so) of the labor force in a mix of freelance, hourly, or contract employment (if employed at all), startups are competing for labor at a fierce rate. In the Bay Area, where many of these services start, it’s not unusual for companies in this category to have more consumer demand than they can handle, all constrained by the fact that they can’t hire enough drivers, enough skilled workers, and so forth. With mobile, thankfully, workers can work when they choose, and startups can access labor at the edge of the network, often at will.
At some point, this was going to turn into a bigger issue. It started with some lawsuits here and there. FedEx and Amazon also have some similar legal things going on. Then the California Commission made a ruling against Uber, in favor of drivers being deemed employees. During this time, I began to invest in some companies, like Managed By Q, which proactively addressed the issue by creating on-ramps for 1099ers to move up in the company and gain W-2 status, as well as new tools for companies and contractors like Payable, which help simplify tax and reporting for both companies and workers. Recently, we put together The On-Demand Conference in SF in May 2015 (videos here) and are planning for v2 of this event to be in NYC on September 15: www.ondemandconference.co
Finally, I will briefly lay out how each side of the debate has merit:
For workers – Clearly, we can agree that everyone wants to make sure that contractors have the ability to feel secure in terms of health, safety, and not being fired without cause. In a world where contracting may be the norm, how will people enjoy the safety and security provided by insurance traditionally? On the flip side, just tying this all to being a W-2 does have some costs — as in my response to Nabeel, the flexibility in schedules for a contractor could be undervalued and hard to quantify in such analyses. I myself have had a flexible schedule for the past 10+ years and I oftentimes value that above most other things. I imagine many others do, too. Some jobs allow for it, but being a contractor participating in a few labor markets can offer real time flexibility as well as the option of moving from one geography to another. As you listen to the NPR discussion, you’ll note my comments at the end — the genie is out of the bottle, Uber isn’t going away, and governments will have less power, relatively speaking, on how to shape this moving forward. The cost of more formal ties between employer and employee or contractor may end up being flexibility, which is why I’m writing all of this and hoping companies will follow Managed By Q’s lead and offer a range of choices for the best and most loyal employees to pursue.
A year ago, I wasn’t sure if the “On-Demand Economy” (ODE) was the real thing or just a fad. I’d keep asking myself, “How can this persist?” and plenty of other people would ask me the same thing, given that out of 70 or so investments I’ve made, over 20 of them touch the on-demand stack in some way. Now as 2015 approaches the midway point, I have since gained more confidence this isn’t a fad, but the early stages of an on-demand world where we will summon goods and services via our watches, via single-purpose connected devices, and perhaps even without consciously thinking about it. Geographically, ODE services are tailor-made for the developing world and urban centers in Asia, especially as those consumers and labor suppliers go straight to mobile devices and skip the laptop and web generations entirely.
So, it was even more good fortune when one of my most frequent seed-stage coinvestors in ODE, Pascal, pinged me on IM to say he’s putting together a conference with my friend Misha @ Tradecraft. I jumped in and we are going to co-host this event on May 19 in San Francisco. Pascal had a good base committed, and so I called up Bastian, Max and Apoorva, Tony, Tri, Dan, Nick to participate — they all loved the idea, as did all the great tech writers who have cover the trend, like Ryan, Eric, Katie, Leena, and even Liz after her breakout series on the topic from 2014. I called up other friends who have also made core investments in ODE, and we are happy to have Satya, Steve, and Simon round out the event. As a bonus, I called up Shervin and convinced him to do a 1:1 Fireside Chat with me earlier in the day.
If you are a potential founder in ODE, work in the sector, want to learn more, cover the sector as a journalist, or invest in it, this is a can’t-miss conference. Here are more details:
Date: May 19, 2015 (all day) Location: Broadway Studios, North Beach, SF (map) Website: (link) Tickets: (register)